Kemeny Capital has issued a new note on Tekcapital highlighting the current value of their portfolio companies and the discount to their current market cap.
After what was a busy week for Tekcapital last week, their shares traded at a 29% discount to their portfolio companies’ NAV on Thursday.
As of the close 17th August, Kemeny Capital noted Tekcapital’s portfolio company NAV was £64.4m, based on the current market prices of Belluscura shares, and recently floated Innovative Eyewear.
Tekcapital’s 100%-owned smart eyewear company, Luycd, saw the NASDAQ IPO of Innovative Eyewear on Monday which valued Tek’s 71% stake at $39m. A couple of day’s trade in the open market saw Tekcapital’s stake valued at the equivalent of £29.1m, as of the close 17th August.
The Kemeny Capital note highlighted investors will likely be eagerly awaiting further commercial success from Tekcapital’s portfolio to gauge the future earnings trajectory of the companies, and any changes to current book value.
Chrysalis Investment shares decreased 3.5% to 84.2p in early morning trading on Monday, following its updated NAV report of 163.48p per ordinary share at 30 June 2022.
The NAV result represented a 22.8% decline since March 2022, with wefox, Klarna, Starling, Brandtech and Wise acting as the significant drivers behind the movement across the period.
The firm commented its valuations were negatively impacted by inflation and material interest rate rises. However, the group noted a “strong rebound” in equity markets and performance of listed peer benchmarks post period end.
Chrysalis Investments announced a balance sheet with £48 million in cash and £57 million in listed assets, making total liquid assets of 20.4% of current market cap.
The company mentioned several highlights over the financial term, including strong performance from Wise, offset by Revolution Beauty’s share price fall.
Chrysalis Investments also confirmed $1.4 billion raised in investments yeat-to-date, including Starling, Klarna and Featurespace, which the group noted were either profitable or considered funded through to profitability.
“We are encouraged that our NAV outturn was in line with the 23% NASDAQ decline in Q2, particularly when our second largest holding, which represented 19% of the portfolio at the beginning of the period, was marked down by almost 80%. The implied write down for the rest of the portfolio is approximately 8% which reflects strong trading, a positive funding round for wefox and the inherent downside protections we have structured into many of our investments,” said Chrysalis Investments co-portfolio managers Richard Watts and Nick Williamson.
“Equity markets have rebounded very strongly since the 30 June, and we note the very strong performance of some of the listed peers we benchmark our portfolio assets against. This has already been reflected in one of our portfolio assets raising primary capital at a premium to its previous funding round and should lead to future NAV progression, if these recent gains are sustained.”
“With over £48m cash and £57m of listed assets, which together represent 20.4% of the market capitalisation, Chrysalis is in a very strong position heading into H2 and we remain confident in the future potential of this portfolio and the outlook of the Company.”
Swedish investor Peter Gyllenhammar has increased his shareholding in property investor and fund manager First Property (LON: FPO) to more than 10% following positive news from Poland.
The share price has recovered from its low of 27p to 29p. Underlying net assets, including assets at market value, were 47.28p a share at the end of March 2022, up from 42.8p a share the previous year. This does not include any valuation on the fund management division, which has third party assets under management of £516.5m.
Poland
A further 9% of the Gdynia office building has been let and the new tenant shou...
Invinity Energy Systems (LON: IES) has signed a memorandum of understanding with US Vanadium to create a US-based 50/50 joint venture to build and sell vanadium flow batteries. Arkansas-based US Vanadium produces high-purity vanadium pentoxide and electrolyte for vanadium flow batteries. Invinity Energy Systems has also delivered and installed a 1.8MWh VS3 flow battery system at the European Marine Energy Centre hydrogen R&D facility in the Orkney Islands. The share price rose 35.9% over the week ending at 53p.
Wishbone Gold (LON: WSBN) has a second drill rig is on site at the Red Setter gold copper project in the Patersons Range area in Western Australia. The drilling has shown the intersection of multiple zones of quartz veining, carbonate and chalcopyrite and pyrrhotite. The shares jumped by 20.8% to 16p.
Evrima (LON: EVA) shares edged up by 1.22% to 4.15p. Premium Nickel Resources Ltd, where Evrima owns 1.11 million shares, has been readmitted to TSX-V after the reverse takeover of North American Nickel Inc. The first assay results from the Selebi nickel copper cobalt sulphide mine in Botswana have been published. There was a positive update for the Molopo Farms complex project in Botswana, where Evrima has an 8.93% project-level interest.
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Fallers
Psych Capital (LON: PSY) investee company Awakn Life Sciences, where Psych Capital owns 426,000 shares, has entered the US addiction treatment and relapse prevention market through a licensing partnership with Revitalist Lifestyle and Wellness Ltd, a ketamine wellness clinic chain. Awakn has a treatment that was validated in a phase II a/b trial, which delivered 86% abstinence for six months after treatment versus 2% before the trial. Revitalist will pay an annual fee and a revenue share per treatment. Even so, Psych Capital shares were the worst performers of the week with a 25.6% fall to 4p.
Ingraine (LON: KING) says AZD1656, which is being developed as a treatment for people with diabetes suffering from Covid-19, has shown evidence that it activates T-regs that might suppress the inflammation that is the prime cause of tissue damage in autoimmune disease. LANCET eClinicalMedicine is publishing the results of the phase II clinical trial. Ingraine owns 2% of Excalibur Medicines Ltd, which has exclusive rights to AZD1656. Shares in Ingraine dipped 20% to 1p.
Chris Akers has increased his stake in Oscillate (LON: MUSH) from 13.1% to 14.25%. The share price fell 11%. Even so, the share price fell 11% to 0.89p.
Altona Rare Earths (LON: ANR) is raising £1.1m at 8p a share ahead of the planned move to the Main Market at the end of September. The share price slipped by 4.62% to 7.75p. A two-year warrant will be issued with each share and that is exercisable at 12p, while a three-year option at 18p will be issued if the warrants are exercised within 30 days of the share price trading above 12p for ten consecutive days. There is an estimated exploration target of up to 56.6 million tonnes at up to 1.65% total rare earth oxide at the Monte Muambe rare earths deposit.
Goodbody Healthcare (LON: GDBY) increased revenues by £2.55m to £7.4m in the first half of 2022. This was driven by revenues from the testing clinics. The loss grew from £1.27m to £1.41m. There is cash in the bank of £3.74m. Goodbody CBD products have been listed by the FSA on the novel food list. There was a 3.7% fall in the share price to 1.3p.
Hydrogen Utopia International (LON: HUI) is starting a US roadshow from 22 August, following the start of trading of the shares on OTCQB Venture Market. Recent US legislation could increase investor interest in the clean energy market. The share price drifted down by 2.7% to 9p.
Valereum (LON: VLRM) is swapping its 20 bitcoin miners in the US for a 24% stake in new company Vinanz, which is conditional on the company listing on a recognised stock exchange. The final stake will depend on the money raised at the time of the listing. This will enable Valereum to concentrate on the Gibraltar Stock Exchange when the deal gets regulatory approval. There was a 2.27% decline in the share price to 21.5p.
Metals explorer Power Metal Resources (LON: POW) announced a positive update for its Molopo Farms complex project in Botswana. This made it the biggest riser on the week with the share price jumping 82.9% to 1.6p. Two ground-based electromagnetic geophysics surveys highlighted a large shallow dipping magnetic conductor at a hole drilled in 2020-21. Further drilling of the nickel copper platinum has been brought forward.
Elast-Eon biostable polymer technology developer RUA Life Sciences (LON: RUA) perked up last week after a positive AGM statement. Revenues grew by 50% in the first four months of the financial year, although this rate is not likely to continue. This year’s loss is currently expected to be similar to the £2.36m made in the year to March 2022 – although there is scope for an upgrade. That would lead to most of the company’s cash running out, so a fundraising could be likely in the next six to nine months. If the current progress continues there could be a lower cash outflow. RUA is close to agreeing a clinical trial design for vascular grafts with the FDA. The shares are 43.3% higher at 48p.
Property services provider Kinovo (LON: KINO) nearly doubled its operating profit in the year to March 2022 and this helped to push up the share price by 43.1% to 37.2p. Net debt was reduced to £340,000. First quarter revenues have risen by 28% to £14m and Kinovo has moved into a net cash position. However, there are still liabilities relating to the disposal of DCB, which is in administration. The latest estimate is that it will cost £4m plus expenses to complete work, which is lower than previous estimates. Management believes this can be funded out of cash flow.
Mobile Streams (LON: MOS) secured a contract to be exclusive global producer and provider of collectible trading card Non-Fungible Tokens for the Mexican national football team. There is a small upfront payment by Mobile Streams, and it will generate royalties of 5%-10% of the sale price. The share price rose throughout the week and ended up 30% to 0.325p.
The Sopheon (LON: SPE) share price rose 23.8% to 650p on the back of securing a five-year contract with the US Navy worth $11.2m. This is for a range of submarine programmes. The product life cycle management software supplier gained certification as a supplier to the US Navy during June.
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Fallers
Fashion brand Joules (LON: JOUL) was the worst performer of the week, falling 36.4% to 26.7p. Trading has deteriorated in recent weeks, although wholesale sales are higher. This means that it will not make a profit this year, even if second half trading improves. Peel Hunt has downgraded its forecast for 20222-23 from a profit of £4m to a loss of £4.2m. Jonathan Brown becomes Joules chief executive at the end of September, and he will have a lot to do to turnaround the business. Discussions with Next (LON: NEXT) about a cash injection continue. The retailer is considering a £15m investment in Joules, which was previously likely to be at a share price of at least 33p.
Yacht painting and services provider GYG (LON: GYG) shares fell 32.7% to 18.5p ahead of the general meeting on 31 August for shareholders to vote on the cancelation of the AIM quotation. The share price was 31.5p before this was announced. If the vote is passed, then the quotation will be cancelled on 8 September. Earlier this month, Harwood Capital increased its stake from 20.5% to 22.2%.
Flexible electrical connectors manufacturer Strip Tinning (LON: STG) surprised the market by revealing that a Croatian customer is terminating a contract from 1 October. This contract for cell management systems for electric vehicles was supposed to be worth €2m a year once peak volumes were hit in a couple of years. The shares fell by 30% to 70p during the week. That is well below the 185p placing price when Strip Tinning joined AIM in February. Finance director Adam Le Van bought 2,700 shares at 105p in July.
Security services and products provider Westminster Group (LON: WSG) grew interim revenues by 13% to £3.9m and the loss was reduced from £929,000 to £787,000. There was a larger reduction in the cash outflow. The year is expected to be heavily second half weighted. Arden Partners is retaining its 2022 forecast pre-tax profit of £1.1m, compared to a loss of £1.9m in the previous year. The share price fell 24.1% to 1.025p, which suggests that there is a lack of confidence in Westminster’s ability to achieve the forecast.
A poor trading statement from Gooch & Housego (LON: GHH) meant that forecasts were slashed by up to one-third and the chief executive is retiring. The share price slumped 23.9% to 649p on the week. Demand for photonics technology remains strong, but a lack of skilled labour in the US and UK and supply chain constraints have hampered the company’s ability to increase capacity. There has been high demand for lasers for semiconductor manufacture. Analysts have reduced their 2021-22 pre-tax profit forecasts to £7.5m-£8m, while a pre-tax profit of around £12m is expected for 2022-23. A 12.5p a share dividend is still expected this year. Mark Webster is retiring as chief executive after eight years. Charlie Peppiatt will succeed him after joining from TT Electronics, which acquired former AIM company Stadium Group, where he was chief executive.
The FTSE 100 outperformed European indices on Fridays as a weaker pound helped support overseas earners, offsetting weakness in retail stocks.
Reckitt Benckiser, AstraZeneca, Unilever, GSK and Diageo were among the top risers on Friday as investors continued to rotate into companies with reliable cashflows.
Retail companies suffered as the ONS statistics revealed a 0.3% jump in July retail sales and a 1.2% fall in sales over the three months to July, linked to rising 10.1% inflation as the cost of living crisis continued to bite.
B&M shares slid 1.8% to 408.8p, Howden Joinery fell 3.4% to 635.8p, JD Sports dipped 0.5% to 123.9p, Kingfisher dropped 3.4% to 239.5p and Next declined 2.8% to 6,150p.
“The consumer backdrop feels increasingly gloomy and that’s bad news because consumer spending is such an important contributor to the UK economy,” said AJ Bell financial analyst Danni Hewson.
Consumer confidence hit its lowest point since records began in 1974, representing nationwide fear brewing over the Russian invasion of Ukraine and impending recession concerns.
The trouble is set to worsen for consumer-facing companies, with the Bank of England’s next interest rates decision expected to hit businesses with more bad news as it fights to wrestle inflation back to its 2% target.
“The Bank of England faces the unenviable task of trying to get inflation down without inflicting too much pain on businesses and households and the seeming impossibility of this task is raising the spectre of prolonged stagflation – a slowing economy and surging prices,” said Hewson.
Retail sales drop 1.2% in three months to July as cost of living crisis biteshttps://t.co/OkkJqPQjR9
“That’s reflected in weakness in the pound, which is actually good news for a globally-orientated FTSE 100 as it flatters the relative value of overseas earnings.”
The Pound fell against the Dollar as record low consumer confidence and poor retail sales dragged the currency down 0.9% to 1.1816.
Meanwhile, Shell and BP shares rose on the blue chip index 1.4% to 2,248.5p and 1.3% to 447.8p, respectively, as the price of oil rose slightly. Brent Crude rose 0.5% to $97 per barrel on the back of continued high demand.
Temple Bar Investment Trust announced a 7.7% fall in net assets to £7.3 million against £7.8 million in HY1 2022.
The trust, which lists its objective as providing growth in income and capital to reach a long-term return above the FTSE all-share index via investment primarily in UK-listed securities, reported a NAV per share with debt at book value drop of 7.2% to 224.3p compared to 236.1p.
Temple Bar also confirmed a NAV per share with debt at market value decline of 5.6% to 226.7p from 234p the last year.
The company highlighted a 1.6% slide in share price to 218p compared to 213p, trading at a 3.8% discount from an 8.7% discount year-on-year, as a result of intense efforts to grow interest in the group, including methods such as refreshing its website and employing targeted marketing tactics.
However, Temple Bar Investment Trust reported a climb in revenue return per ordinary share to 4p against 2.7p.
The group confirmed a positive outlook despite the volatile market environment going forward.
“Rarely has it been so difficult to predict the future. Inflation in the UK gets ever higher and recession may be just around the corner,” said Temple Bar Investment Trust chairman Arthur Copple.
“The terrible events in Ukraine and the pressure that, inter alia, has put on energy and commodity prices all add to the uncertainty. The domestic political situation is unclear.”
“Nevertheless, as outlined in their report the Investment Manager believes the portfolio remains attractively priced and can still perform well.”
The trust also noted a dividend per ordinary share hike to 4.1p from 3.9p the year before.
Joules shares crashed spectacularly in Friday trading, tumbling a painful 37.2% to 27.5p as the fashion company fell victim to a range of factors, including poor demand linked to hot weather and the soaring cost of living.
The group said it expected a “significant loss” in HY1 2022, alongside a FY 2022 profit “significantly below” expectations, marking the high street darling as the latest casualty in the retail bloodbath.
Joules shares: What went wrong?
The cost of living crisis has been making itself felt in recent months, with 10.1% inflation levels chilling customer spending as it bites chunks out of wallets and pumps the brakes on sales across the retail sector.
Meanwhile, the remarkable surge in hot weather over the summer punched a sizeable dent in demand for Joules’ key categories such as rainwear, knitwear, outerwear and wellies, all staples of a typical, far colder season across the country.
The cherry on top of the sadness sundae for Joules has been its slowdown in its Garden Trading business, which it acquired in February 2021 and drove a 14% year-on-year e-commerce sales rise for the company in HY1 last year.
Next
Joules shares picked up on the release of its HY1 2022 results in February this year, with interest piqued in part by its fresh collaborations with high street fashion giant Next.
The two companies launched a Joules formal wear collection, which had been well received, along with a Next nursery product range scheduled for launch in HY2.
Joules also evolved Next’s Platform Plus model as part of its slate of third party partnerships, allowing for higher levels of product flexibility and inclusion on Next.com.
The two companies confirmed on 7 August that talks were in progress for Next to acquire an equity stake in Joules, sending Joules shares from 38p to 44p on the day of the announcement.
However, with no fresh reports since early August and no concrete proposals to help salvage the company from its current wreckage, Joules’ share price plummeted down to its present level.
The retail group hasn’t issued a dividend since 2019, choosing to focus on its balance sheet and rebuilding financial strength.
However, with demand tumbling and the UK on the brink of a recession, it looks like grim times ahead for the fashion group, with no sign of near-term recovery in sight.
Joules shares currently have a PE ratio of 11.3 and a forward PE ratio of 32.2, reflecting expectations of severely malnourished earnings and little hope on the horizon of shareholder rewards.
Joules shares have sunk to extremely low depths, and they could well stay for there for quite some time, failing any major new developments at the company.
“This would mark the end of the road for the indebted cinema chain, who has around £4bn worth of debt before factoring leaseholder liability and annual revenues of under £1.5bn,” said XTB chief market analyst Walid Koudmani.
“Talks over recent weeks to restructure the debt through a deleveraging transaction are likely to have failed.”
Cineworld has apparently hired lawyers from Kirkland & Ellis LLP and AlixPartners as consultants to guide the company through the bankruptcy proceedings.
The film chain reported earlier this week that it was looking down the barrel at grim finances, with recent admission levels “below expectations.”
The business blamed a dearth of big picture releases since the franchise reopened post-Covid, with films including Top Gun: Maverick and Thor: Love and Thunder failing to attract booming customer levels back to theatres.
“The firm will blame the lack of summer blockbusters as a reason behind its sharp downfall but in reality its aggressive acquisition plan has taken on too much debt and this was always a huge risk as interest rates rise,” said Koudmani.
Tom Cruise couldn’t save Cineworld
“Moreover, the move to stay at home entertainment and streaming providers has created a pivotal shift in the way consumers enjoy films and Cineworld simply has not adapted fast enough.”
“It’s all quite sad as the UK’s high street will now likely lose a popular and familiar brand name.”
Cineworld has not commented on the Wall Street Journal report at the time of writing.
Just Eat announced the sale of its 33% stake in Brazilian joint-venture iFood to Prosus N.V. affiliate MIH Movile Holdings for a consideration of €1.8 billion on Friday.
“In what seems like a never-ending battle between online takeaway firms, Just Eat Takeaway has secured itself some more firepower through the sale of a stake in Brazil’s iFood,” said AJ Bell financial analyst Danni Hewson.
The food delivery group commented the transaction would comprise €1.5 billion in cash on closing and a deferred consideration, pending the performance of the online food delivery business over the next 12 months, of up to €300 million.
Just Eat said the consideration represented an equity multiple in excess of five times the investments over the life of the joint-venture.
The company added it would retain the proceeds to strengthen its balance sheet and service repayments of its upcoming debt maturities.
“A €1.8 billion cash injection could be very helpful in terms of paying down debt and potentially marks a shift in Just Eat’s approach,” said Hewson.
“Though the value of the transaction is notably less than the €2.3 billion turned down by the company last summer when ordering food over the internet arguably reached its zenith thanks to the pandemic.”
The food delivery service said it continued to actively explore the partial or full sale of GrubHub with its advisors, however the company said there was no certainty any agreement with third parties regarding the entity would be reached, along with no projected timeline for any such agreements.
“Just Eat might have to swallow the sale of its US platform Grubhub at a similarly discounted price, not long after splashing out on a $7.3 billion deal, as it looks to concentrate on boosting its market position in Europe,” said Hewson.
“This retrenchment to a European focus makes sense when you consider how fierce the competition is on this side of the Atlantic.”
The cost of living crisis also risks biting chunks out of Just Eat’s profits, representing a tough year ahead for the delivery service as consumers cut down on expensive takeout fees.
“However, there are long-term and short-term questions about the viability of the business,” said Hewson.
“Increased costs mean the company will probably have to put up prices for delivery. But will people be prepared to pay more, particularly when cost of living pressures are becoming more acute?”
“All the while the company is facing rising costs and will have to maintain promotional spend to protect and grow its market share.”
